India's Infosys, Wipro top Q2 revenue estimates as spending revives
By VarunVyas Hebbalalu, Sai Ishwarbharath B and Haripriya Suresh
BENGALURU, Oct 17 (Reuters) -Indian software services providers Infosys INFY.NS and Wipro WIPR.NS issued revenue forecasts below analysts' expectations, suggesting a broad-based recovery in global tech spending was yet to take hold.
U.S.-listed shares of Infosys, which have gained more than 35% in the past six months, fell 2.5% as its second-quarter profit also missed estimates due to higher costs. Wipro shares were also down by a similar percentage.
While India's IT firms have seen a recovery in spending from banking, financial services and insurance (BFSI) firms, which account for about a third of their revenue, they are yet to see clients in other industries loosen their purse strings.
Infosys CEO Salil Parekh said the U.S. interest rate cut and an easing inflation point to higher spending. "Certainly, in financial services we have seen that but we wait to see that in other industries," he said on Thursday.
The comments come a week after industry leader Tata Consultancy Services TCS.NS flagged weakness in its mainstay U.S. market.
Infosys, which registered its best growth in the BFSI segment in seven quarters, raised its full-year revenue growth forecast to 3.75%-4.5% from 3%-4%. But it maintained its margin forecast for the year at 20%-22% on wage hikes.
"The forecast for both companies is a bit lower than expectations and that's getting reflected in the US-listed shares. The street was expecting 4-5% for Infosys, and a bit higher for Wipro (in Q3)," said Shaji Nair, analyst at Sharekhan by BNP Paribas.
Wipro sees third-quarter revenue ranging from a decline of 2% to staying flat.
Infosys' second-quarter revenue rose 5.1%, higher than the 4.7% increase expected by analysts on average, while its profit of 65.06 billion rupees came in below the average estimate of 68.06 billion rupees.
"Infosys is a clear-cut stand-out among all the major IT players," KR Choksey analyst Dipak Saha said, citing its strength in North America. But he was less optimistic about its peers.
"These companies are still not talking confidently about discretionary spend."
Wipro's 0.6% revenue growth in the BFSI segment was its first since March 2023. In terms of geography, revenue from the U.S. and Canada, two key markets, also registered growth.
"Wipro's recovery may lag compared to the other two firms as they have new leadership," said Pareekh Jain, founder of IT research firm EIIR Trend.
While Wipro's overall revenue fell 1%, that was less than the 1.1% drop analysts had expected. LTIMindtree's revenue rose 5.9%, just shy of analysts' 6% growth expectation.
Earlier this week, HCLTech HCLT.NS, the No.3 IT services company, raised the lower end of its full-year revenue forecast.
Unlike its larger rivals, LTIMindtree LTIM.NS missed quarterly revenue estimates. Its profit rose 7.7% to 12.51 billion rupees, edging past analysts' estimate of 12.25 billion rupees.
($1 = 84.0340 Indian rupees)
Reporting by Varun Hebbalalu, Sai Ishwarbharath B and Haripriya Suresh in Bengaluru; Editing by Savio D'Souza and Saumyadeb Chakrabarty
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
